The War That Shook the Energy Order: How the U.S.–Israel Confrontation with Iran Is Reshaping the Global Economy

Baba Yunus Muhammad

The eruption of war involving the United States, Israel, and Iran has rapidly evolved from a regional military confrontation into one of the most consequential economic shocks of the early twenty-first century. Within days of the first strikes, global financial markets reacted with visible alarm. Energy prices surged, supply chains fractured, and governments from Asia to Europe began activating emergency energy reserves. Yet the epicentre of the shock lies not only on the battlefield itself but in the arteries of global energy that run through the Persian Gulf. The war has exposed once again a structural truth of the international economy: the stability of the modern world remains intimately tied to the uninterrupted flow of Gulf hydrocarbons.

At the heart of this crisis is the vulnerability of the Strait of Hormuz, the narrow maritime corridor through which roughly one-fifth of the world’s oil supply normally passes each day. Any disruption to this passage instantly reverberates across the global economy. Even temporary threats to tanker traffic are enough to trigger panic in energy markets, as shipping insurers withdraw coverage and vessels divert routes to avoid the danger zone. The strategic centrality of this chokepoint has long been acknowledged by energy analysts, yet the current conflict has demonstrated how quickly the global economy can feel its effects when geopolitical tensions escalate.

The consequences for global oil supply have therefore been immediate and severe. Energy economists estimate that disruptions across Gulf producers could temporarily remove several million barrels per day from international markets. The Gulf region remains the single most important energy hub in the world, collectively holding close to one-third of the planet’s proven oil reserves and a dominant share of globally traded liquefied natural gas. When even a fraction of this production is constrained, the resulting supply shock reverberates across continents.

Financial markets reacted accordingly. Benchmark crude prices, which had remained relatively stable in preceding months, surged sharply as traders priced in the possibility of prolonged disruption. Such price spikes rarely remain confined to the energy sector. Oil is a foundational input for transportation, manufacturing, and logistics across the world economy. When prices climb dramatically, the cost of moving goods rises, industrial production becomes more expensive, and inflationary pressures quickly spread through global markets.

Natural-gas markets have proven equally sensitive to the unfolding crisis. Facilities across the Gulf are central to global supplies of liquefied natural gas, particularly for energy-hungry economies in Asia and Europe. When military escalation threatens production or export infrastructure, gas prices respond instantly. Several energy producers in the region have already signaled operational disruptions, forcing import-dependent economies to seek alternative suppliers at significantly higher cost. For countries whose electricity generation depends heavily on imported gas, the consequences include rising power prices, budgetary strain, and heightened economic uncertainty.

Yet the war’s economic implications extend beyond energy markets alone. One of the least discussed but potentially most devastating consequences lies in its impact on global food production. Modern agriculture is inseparable from the petrochemical economy. Natural gas is the primary feedstock for the production of ammonia, the key ingredient in nitrogen fertilizers that sustain modern crop yields. Globally, the fertilizer industry consumes roughly 170 billion cubic meters of natural gas each year, accounting for nearly one-fifth of industrial gas demand. Without these inputs, the productivity of modern agriculture would decline dramatically.

The connection between hydrocarbons and food is therefore direct and profound. Nitrogen fertilizers derived from ammonia are estimated to support roughly half of global food production. Scientific assessments suggest that the food grown with these fertilizers helps sustain the diets of nearly 3.8 billion people worldwide—almost half of humanity. In other words, the modern global food system rests upon an industrial foundation built largely from natural gas.

When conflict disrupts energy production, fertilizer markets are among the first sectors to feel the shock. Fertilizer plants are extremely energy-intensive, and rising gas prices often force producers to curtail output. The Gulf region itself is a major exporter not only of hydrocarbons but also of critical fertilizer inputs, including ammonia and urea. Disruptions to shipping routes through the Strait of Hormuz therefore threaten to constrain global fertilizer supplies just as planting seasons begin across major agricultural regions.

The consequences are already visible in commodity markets. Fertilizer prices have surged as traders anticipate tighter supplies and higher production costs. When fertilizer becomes more expensive, farmers frequently reduce application rates in order to manage costs. Even modest reductions in fertilizer use can lead to substantial declines in crop yields. In large agricultural economies—from India and Brazil to the United States and across Africa—the resulting drop in production can translate into millions of tonnes of lost grain output.

Such disruptions would come at a particularly dangerous moment for the global food system. International humanitarian agencies estimate that roughly 735 million people already suffer from chronic hunger worldwide. Climate shocks, supply-chain disruptions, and rising food prices have pushed many regions to the brink of crisis. Sub-Saharan Africa and parts of South Asia remain especially vulnerable, where food insecurity is already widespread and agricultural systems are highly sensitive to fertilizer availability.

In this context, a sustained decline in fertilizer production could trigger a cascading chain reaction throughout the global economy. Energy disruptions raise fertilizer prices; reduced fertilizer supply lowers agricultural productivity; declining harvests push food prices higher; and rising food costs intensify poverty, malnutrition, and political instability. What begins as a geopolitical confrontation in the Gulf may ultimately manifest itself in rising bread prices in Cairo, wheat shortages in South Asia, and worsening malnutrition across parts of Africa.

The Gulf states themselves face a complex economic paradox in this unfolding crisis. In theory, higher oil prices should generate extraordinary revenues for major producers. Yet these gains can evaporate if production cannot reach international markets. When shipping lanes become unsafe and insurance costs surge, exporters are forced to reduce output regardless of global demand. Governments across the region are therefore scrambling to redirect shipments through alternative pipelines and ports, attempting to bypass maritime chokepoints and maintain export flows.

The broader geopolitical implications are equally profound. Energy security has once again emerged as a central axis of global power politics. Major consuming nations have begun releasing strategic petroleum reserves in order to stabilize markets, while energy-importing states are urgently seeking alternative suppliers. Non-OPEC producers may attempt to increase output to offset the shortfall, but the scale of Gulf production means that such measures can only partially compensate for disruptions in the region.

Ultimately, the conflict has revealed the extraordinary fragility of the global economic system. Decades of globalization have produced intricate networks of trade, finance, and production that depend heavily on stable energy flows from a handful of strategic locations. When those flows are threatened, the consequences ripple far beyond the immediate theatre of conflict.

The deeper lesson may therefore be civilizational rather than merely economic. Oil and gas are not simply fuels that power vehicles or industries; they are the hidden foundation of the modern world economy. They shape the cost of transportation, the price of manufactured goods, the availability of electricity, and even the productivity of the farms that feed humanity. When the arteries of this system are disrupted, the effects cascade through every layer of global life—from financial markets to the dinner tables of ordinary households.

In that sense, the present war serves as a stark reminder of the profound interdependence that defines the modern age. A conflict unfolding in the waters of the Strait of Hormuz can reverberate across energy markets, agricultural systems, and food supplies for billions of people. The world economy may appear vast and resilient, yet it remains tethered to fragile geographic corridors and volatile political relationships. When these are shaken by war, the consequences reach far beyond oil terminals and shipping lanes, touching the most basic human necessity of all—the security of food itself.

Author Bio

Baba Yunus Muhammad is the President of the Africa Islamic Economic Forum (AFRIEF), a journalist, and an activist specializing in Islamic economics, governance, and global finance. Known for blending rigorous analysis with incisive critique, he highlights the intersection of policy, sovereignty, and social equity. Through his work, he advocates for structural reform, local empowerment, and continental self-determination, challenging narratives that marginalize Africa in the global economic system.